University Fees and Muddled Motives

On this morning’s Today programme Education minister Michael Gove – reputedly a man of great intelligence – maintained that raising University tuition fees to nearly 3 times their current level for some Universities would have absolutely no effect on levels of applications from students from lower and middle income backgrounds.

This must be a first – a Conservative Minister who believes economic incentives have no effect on behaviour! He maintained would-be students would make a ‘rational calculation’ that even £9,000 a year tuition fees would be worth paying because of the long-term benefits they would gain from this ‘investment’.

We’ll leave aside the obvious irony that the Government has no compunction about loading a small mountain of debt on the next generation who go to University, whilst decrying the idea of doing it through public sector borrowing. Presumably the difference is ‘choice’?

Gove’s position was of course an aberration, brought on by hard questions. The usual Conservative position is that economic incentives – or ‘market forces’ – trump everything else.

The truth was freely admitted by other Ministers – including Liberal Democrat Vince Cable who is actually responsible for Universities. In fact the Government’s policy is to put in place a series of policies to off-set the negative incentives that much higher tuition fees for top Universities will introduce.

But this only serves to illustrate the inconsistencies about incentives that lie at the heart of many policies, not just of this Coalition but also often of their New Labour predecessors too.

On the one-hand they maintain that economic incentives will always trump regulation or ‘top-down’ solutions, so what is needed is more markets, competition, choice and the like. In the case of universities however, it appears that top-down regulation is supposed to trump the economic incentives created by sky-rocketing tuition fees – universities will be forced – by regulation – to provide bursaries and out-reach programmes to recruit from lower income backgrounds, even though the economic incentives for them will be to do the opposite. Students from low-income backgrounds are more risky, less likely to have wealthy parents, etc.

I recently sat through the most appalling graduation ceremony for my step-daughter who was graduating from one of our top London university colleges. These events are usually graced by a speech from a distinguished academic or personality about the bright future the graduates can expect and what life might bring them.

Instead, we were treated to a prolonged, crude, sales pitch that was clearly, and solely, aimed at generating more donations from alumni and their parents. The graduates didn’t get a mention – they were clearly just fee and endowment fodder. This may be not (yet) be usual, but I doubt it equally be an example of what we can expect in the future.

But back to incentives – of course the proponents of ‘rational utility maximisation’ as the economists call do expect that material incentives trump all, and that people will rationally pursue them. Unfortunately the evidence doesn’t support this, or at least only partially.

Firstly, people are not solely motivated by self-interest – the evidence for genuine altruism, for example, is over-whelming. Not everyone, not always, nor everywhere – but there is enough altruism around to cause even the most dismal economist pause for thought – if they’d only admit it.

Secondly, people’s ability and wish to be rational is doubtful at best. What Herbert Simon famously called “bounded rationality” comes into play in most situations – we have simply too much information (or too little) and too many choices to make truly rational choices so we approximate. And that’s when we’re not allowing our emotions or our unconscious to overrule our conscious reasoning.

These are issue I’ve explored in a couple of my books. In my most recent book on ‘Theories of Performance’ I explore these issues of complex motivation and offer some theoretical ideas about how we can understand them better. In my ‘The Paradoxical Primate’ published a few years back I explored why we might have evolved to be such contradictory creatures.

Motivation, choice and actions are far more complex than simplistic economics ever allows for. Politicians often recognise this in practice. Mr Cameron’s Big Society even recognises it explicitly – calling on motivations of citizen’s that certainly don’t fit into a rational utility maximisation framework. But politicians seem incapable of thinking clearly about these contradictions and complications – they always prefer a simple, indeed simplistic, and one-dimensional theories. So they get themselves into a muddle – as they are now doing over universities.